The URL can be used to link to this page

Home My WebLink AboutWater and Watewater Rate Advisory Committee Agenda Packet - September 29, 2016City of Colleyville Page 1 Water and Wastewater Rate Advisory Committee Agenda City Hall 100 Main Street Colleyville, Texas 76034 817.503.1000 www.colleyville.com Thursday, September 29, 2016 5:30 p.m. Executive Conference Room Third Floor City Hall 1. CALL TO ORDER 2. INTRODUCTION OF COMMITTEE/COMMITTEE CHARGE/CALENDAR OF EVENTS 2a Introduction of Committee/Committee Charge/Calendar of Events 3.REGULAR AGENDA ITEMS 3a Presentations and discussion of water and wastewater rates 4.ADJOURNMENT I hereby certify this agenda was posted on City Hall bulletin boards Friday, September 23, 2016 by 5:00 p.m. Amy Shelley, TRMC City Secretary A quorum of the City Council or any Colleyville Board, Commission, or Committee may be in attendance at this meeting. Any matter on this agenda may, at the discretion of the governing body, be opened for public comment and discussion. If you plan to attend this public meeting and have a disability that requires special accommodations, please advise the City Secretary at least 48 hours in advance at 817.503.1130, and reasonable accommodations will be made to assist you. City of Colleyville Page 1 Water and Wastewater Rate Advisory Committee Agenda Briefing City Hall 100 Main Street Colleyville, Texas 76034 www.colleyville.com Agenda Number 2a Agenda Date 09/29/2016 Number Type Presentation and Discussion Department City Manager Title Introduction of Committee/Committee Charge/Calendar of Events Strategy Map Connection B2- Proactively seek process improvements and sustainable solutions B4- Cultivate a culture of transparency and consistent communication Explanation This item allows the opportunity for the Water and Wastewater Rate Advisory Committee members to introduce themselves, (roster attached), receive information regarding the Committee charge, per attached Resolution R-16-4030 and Resolution R-16-4038; and discuss the attached Calendar of Events which outlines the meeting dates and action items to be completed. Attachments 1.Water and Wastewater Rate Advisory Committee roster 2.Resolution R-16-4030 3.Resolution R-16-4038 4.Water and Wastewater Rate Advisory Committee Calendar of Events Updated September 23, 2016 WATER AND WASTEWATER RATE ADVISORY COMMITTEE APPOINTED SEPTEMBER 20, 2016 – RESOLUTION R-16-4038 CHAIR Susan Mathisen 317 Chestnut Bend Colleyville, TX 76034 W: 817-983-1620 smathisencpa@gmail.com VICE CHAIR Gerald Gibson 6100 Brazos Court Colleyville, TX 76034 H: 817-821-1602 jergibson@aol.com Raymond Allee 5907 Highland Hills Lane Colleyville, TX 76034 H: 817-329-0186 rayallee@aol.com Thomas Bauch 4201 Shadow Ridge Drive Colleyville, TX 76034 H: 817-577-1471 W: 817-312-2288 Tomb4201@gmail.com George Dodson 7309 Balmoral Drive Colleyville, TX 76034 H: 817-488-0082 W: 817-937-3198 Gwdodson@tx.rr.com James Dove 800 Colleyville Terrace Colleyville, TX 76034 H: 817-498-4949 Jamesldove1@gmail.com Jeff Gilstrap 1708 Avalon Drive Colleyville, TX 76034 H: 214-870-2691 W: 817-429-6262 jeffg@harrispackaging.com Joe Moore 133 Acuff Lane Colleyville, TX 76034 H: 817-577-2050 W: 817-999-4108 Joe.d.moore@tx.rr.com Jeff Pistor 7200 Holly Lane Colleyville, TX 76034 H: 817-424-0056 W: 817-800-0004 jgpistor@verizon.net Tim Raine 3508 Fox Meadows Drive Colleyville, TX 76034 H: 817-360-6119 W: 817-421-8100 Timraine25@gmail.com Samuel van Bever 4105 Crest Court Colleyville, TX 76034 H: 817-427-4105 W: 214-403-1445 slviii@yahoo.com RESOLUTION R-16-4030 A RESOLUTION ESTABLISHING AND PROVIDING A SCOPE FOR AN AD HOC COMMITTEE TO REVIEW UTILITY RATES WHEREAS, on June 6, 2016, the City Council held a priority setting worksession, at which eight consensus policy priorities were identified; and WHEREAS, of those eight consensus policy priorities, restructuring the water rate was included; and WHEREAS, action was taken by the City Council to provide immediate water rate relief by adopting a temporary flat volumetric rate of $4.36 per 1,000 gallons was initiated; and WHEREAS, City staff further engaged NewGen Strategies & Solutions to conduct a full analysis of the City's water and wastewater rates to provide options for permanent rates. NOW, THEREFORE,. BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF COLLEYVILLE, TEXAS: Sec. 1. THAT an ad hoc committee is hereby established to review the water and wastewater rates as provided in the analysis perfiormed by NewGen Strategies & Solutions. Sec. 2. THAT the committee will consist of between seven and ten members to be appointed at the September 20, 2016, City Council meeting. Sec. 3. THAT City Council will determine a Chair and Vice Chair after appointments have been determined. Sec. 4. THAT the ad hoc committee's responsibilities may include: a. Review the cost of service study or analysis. b. Review rate options that will recover the cost of service operations, maintenance and new infrastructure required). c. Make recommendations to the City Council. d. Help to communicate and educate the community about water and wastewater rates. Sec. 5 Resolution R-16-4030 Page 2 of 2 THAT this resolution shall take effect immediately upon passage. AND IT IS SO RESOLVED. APPROVED BY A VOTE OF AYES, O NAYS, AND o ABSTENTIONS ON THIS THE 6T" DAY OF SEPTEMBER 2016. Mayor Richard Newton Mayor Pro Tem Chris Putnam _ Place 1, Tammy Nakamura _ Place 5, Nancy Coplen _y. Place 2, Bobby Lindamood IM.._ Place 6, Mike Taylor .__ Place 4, Jody Short ATTEST: S Amy elley, Tfi 1C City Secretary CITY OF COLLEYVILLE rVll ^"'_ Richard Newton Mayor Water and Wastewater Rate Advisory Committee Calendar of Events All meetings will begin at 5:30 p.m. in the Executive Conference Room – 3rd Floor – City Hall DATE ACTION September 20, 2016 City Council appointments Thursday, September 29, 2016 First Committee meeting Objective: Education and background information Actions/agenda: Introductions/ice breaker Rates 101 Presentation (Chris Ekrut)- Basics of rates, rate components (base rate vs. volumetric rate), and general philosophy behind different approaches to rate setting Water/Wastewater Service 101 Presentation (Jeremy Hutt)- Explanation of water and wastewater service, from source to tap to treatment; include visual aids such as meters if possible; which entities are responsible for what (TRWD, TRA, City) Colleyville's Costs Presentation (Chris Ekrut)- Similar to the presentation to City Council on August 16, 2016, to provide an understanding of what costs must be recovered Thursday, October 6, 2016 Second Committee meeting Objective: Consider options and impacts Actions/agenda: Presentation and discussion of rate design options for how to recover the City’s costs through different combinations of rate components Presentation and discussion of customer impact of different rate design options Wednesday, October 12, 2016 Third Committee meeting Objective: Determine recommendation Actions/agenda: Presentation and discussion of any follow up information requested Discussion of what the committee would like to recommend to the City Council Tuesday, October 18, 2016 Committee submits report with recommendations to City Council Tuesday, November 1, 2016 First Reading and Public Hearing Tuesday, November 15, 2016 Second Reading and Public Hearing City of Colleyville Page 1 Water and Wastewater Rate Advisory Committee Agenda Briefing City Hall 100 Main Street Colleyville, Texas 76034 www.colleyville.com Agenda Number 3a Agenda Date 09/29/2016 Number Type Regular Agenda Items Department City Manager Title Presentations and discussion of water and wastewater rates Strategy Map Connection B2- Proactively seek process improvements and sustainable solutions B4- Cultivate a culture of transparency and consistent communication Explanation Jeremy Hutt, Public Works Director, will provide a Water/Wastewater 101 presentation which will explain water and wastewater service from source to tap and treatment. Chris Ekrut, Director, Environmental Practice, NewGen Strategies and Solutions, will offer a presentation which will provide an overview of rate components and rate-making basics, as well as a review of Colleyville's costs to provide water and wastewater service. Attachments Water and Wastewater Rate Advisory Committee Meeting September 29, 2016 Worksession •Introduction of Committee •Discussion of Committee Charge •Overview of Calendar of Events Introduction Source Raw Water •Tarrant Regional Water District Water Treatment •Trinity River Authority –Tarrant County Water Supply Project Water Distribution •City of Colleyville Water Consumption •Water Customers Wastewater Collection and Removal •City of Colleyville Wastewater Treatment •Trinity River Authority –Central Regional Wastewater System Discharge Treated Wastewater •Trinity River Authority –Central Regional Wastewater System Our Water Cycle Source Raw Water •Responsible Party •TRWD •Key Facts •Provides raw water that originates in east Texas Our Water Cycle •Cedar Creek Reservoir •Richland Chambers Reservoir •The raw lake water is pumped to Lake Arlington where is made available to TRA Water Treatment •Responsible Party •Trinity River Authority -Tarrant County Water Supply Project (TCWSP) •Key Facts •5 Partner Cities •Serves over 234,000 people •Total System Capacity •6 MGD –Original Capacity in 1975 •89 MGD –Current Capacity Our Water Cycle Water Distribution •Responsible Party •City of Colleyville •Key Facts •Over 200 miles of water lines •2.2 billion gallons of water delivered in 2015 •9,931 water meters •1,450 fire hydrants •3 elevated water towers a ground storage tank with a pump station Our Water Cycle Water Consumption •Responsible Party •Water customers •Key Facts •Water is used for several everyday tasks •Irrigation •Cleaning •Cooking or Drinking Our Water Cycle Wastewater Collection and Removal •Responsible Party •City of Colleyville Our Water Cycle •Key Facts •Over 169 miles of sanitary sewer lines •1.1 billion gallons of sewage conveyed in 2015 •3,029 Manholes •Two lift stations Wastewater Treatment •Responsible Party •Trinity River Authority –Central Regional Wastewater System •Key Facts •21 Partner Cities •Serves 1.2 million people •Capacity •162 MGD –Average Flow •405 MGD –Peak Flow Our Water Cycle Discharge Treated Wastewater •Responsible Party •Trinity River Authority –Central Regional Wastewater System •Key Facts •Ninety-nine percent of conventional pollutants from raw wastewater have been removed •Discharges into the Trinity River Our Water Cycle Year 1 Year 2 Year 3 Year 4 Year 5 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 WATER EXPENSE SUMMARY Utility Billing Fixed Costs $213,051 $217,312 $221,658 $226,091 $230,613 Variable Costs - - - - - Subtotal $213,051 $217,312 $221,658 $226,091 $230,613 Utility Support Fixed Costs $618,637 $631,009 $643,629 $656,502 $669,632 Variable Costs - - - - - Subtotal $618,637 $631,009 $643,629 $656,502 $669,632 Water Utility Operations Fixed Costs $605,045 $617,146 $629,489 $642,079 $654,920 Variable Costs (Chemicals)2,450 2,499 2,549 2,600 2,652 Purchased Water 8,980,767 9,453,587 9,934,111 10,333,547 10,650,836 Subtotal $9,588,262 $10,073,232 $10,566,149 $10,978,226 $11,308,408 Non-Departmental Fixed Costs $97,675 $99,628 $101,621 $103,653 $105,726 Variable Costs (Electricity)62,727 63,982 65,261 66,566 67,898 Subtotal $160,402 $163,610 $166,882 $170,219 $173,624 Tomorrow Fund Transfer 32,772 - - - - Compensation Adjustments 14,104 - - - - Capital Cash Funded $1,400,000 $1,530,293 $1,591,033 $1,572,530 $1,553,437 Debt Service 179,950 78,663 - - - Subtotal $1,579,950 $1,608,956 $1,591,033 $1,572,530 $1,553,437 Total Water Cost of Service $12,207,177 $12,694,119 $13,189,351 $13,603,569 $13,935,714 Non-Rate Revenue Offsets ($155,356)($155,356)($155,356)($155,356)($155,356) Water Revenue Requirement $12,051,821 $12,538,763 $13,033,995 $13,448,213 $13,780,358 City of Colleyville, Texas Water and Wastewater Cost of Service and Rate Design Forecast Summary Page 1 of 2 Year 1 Year 2 Year 3 Year 4 Year 5 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 City of Colleyville, Texas Water and Wastewater Cost of Service and Rate Design Forecast Summary WASTEWATER EXPENSE SUMMARY Utility Billing Fixed Costs $213,051 $217,312 $221,658 $226,091 $230,613 Variable Costs - - - - - Subtotal $213,051 $217,312 $221,658 $226,091 $230,613 Utility Support Fixed Costs $618,637 $631,009 $643,629 $656,502 $669,632 Variable Costs - - - - - Subtotal $618,637 $631,009 $643,629 $656,502 $669,632 Wastewater Utility Operations Fixed Costs $292,653 $298,506 $304,476 $310,566 $316,777 Variable Costs (Chemicals)3,300 3,366 3,433 3,502 3,572 Purchased Wastewater Treatment 2,406,633 2,767,627 3,182,772 3,660,187 4,209,215 Subtotal $2,702,586 $3,069,499 $3,490,681 $3,974,255 $4,529,564 Non-Departmental Fixed Costs $97,675 $99,628 $101,621 $103,653 $105,726 Variable Costs (Electricity)62,727 63,982 65,261 66,566 67,898 Subtotal $160,402 $163,610 $166,882 $170,219 $173,624 Tomorrow Fund Transfer 11,514 - - - - Compensation Adjustments 14,104 - - - - Capital Cash Funded $600,000 $710,850 $772,626 $755,260 $737,406 Debt Service 179,950 78,663 - - - Subtotal $779,950 $789,512 $772,626 $755,260 $737,406 Total Wastewater Cost of Service $4,500,243 $4,870,943 $5,295,476 $5,782,328 $6,340,840 Non-Rate Revenue Offsets ($128,356)($128,356)($128,356)($128,356)($128,356) Wastewater Revenue Requirement $4,371,887 $4,742,587 $5,167,120 $5,653,972 $6,212,484 Page 2 of 2 September 29, 2016 City of Colleyville, Texas Water and Wastewater Customer Rate Committee Rate-making 101 NEWGEN STRATEGIES AND SOLUTIONS, LLC The “business side of government” •Self sufficiency –In a “perfect” world –Revenues must match or exceed expenses •City Council serves as the Board of Directors –Policy-setting body •Important to Understand the Policy Goals and Objectives of the Board when pricing service 3 NEWGEN STRATEGIES AND SOLUTIONS, LLC Rate Process 4 Determine Cost of Service •What is our cost of doing business? Establish Cost Recovery Philosophy •How do we recover the cost from customers? Review Cost Recovery Options •What is the impact to customers of our chosen philosophy? Adopt Rates NEWGEN STRATEGIES AND SOLUTIONS, LLC Key Policy Questions •What are our objectives? –Meeting revenue needs –Revenue stability –Affordability –Equity –Administration –Conservation –Economic Development –Transparency –Others? •Do our rates address our objectives? 5 NEWGEN STRATEGIES AND SOLUTIONS, LLC American Water Works Association Key Rate Attributes and Criteria Implementation Equity Customer Conservation Financial Administrative Burden Interclass Affordability Average-Day Savings Revenue Sufficiency Public Understanding Intraclass Economic Development Peak-Season Savings Revenue Stability Political Acceptance Intergenerational Rate Shock / Volatility Peak-Day Savings Rate Stability Implementation Risk Inside/Outside Understandability of Rates/Bill Sustainability Rate Predictability Legal Defensibility Industry Standards Perception of Equity Compliance Financial Risk 6 NEWGEN STRATEGIES AND SOLUTIONS, LLC Legal Defensibility and Rate Criteria •Legally Necessary Criteria –Texas Water Code 13.043(j) “. . . every rate made, demanded, or received by any retail public utility . . .shall be just and reasonable. Rates shall not be unreasonably preferential, prejudicial, or discriminatory but shall be sufficient, equitable, and consistent in application . . .” 7 NEWGEN STRATEGIES AND SOLUTIONS, LLC Rate Structure Components •Fixed Charge •Variable or Consumption-Based 8 Fixed Costs •Does not vary with billed usage •Typically a majority of costs for a utility Variable Costs •Varies with billed usage •Power, chemical, etc. •Typically a limited portion of costs for a utility ** Stability of Revenue Stream Should Always be Considered ** NEWGEN STRATEGIES AND SOLUTIONS, LLC Common Water & Wastewater Rate Structures •Fixed Charge –Minimum Charge –Meter Charge •Should this include an allocation? 9 •Variable Charges –Uniform –Declining Block –Inclining Block –Seasonal NEWGEN STRATEGIES AND SOLUTIONS, LLC Water Rate Structure 10 Base Rate1 Meter Size 5/8 inch $ 13.55 3/4 inch $ 13.55 1 inch $ 13.55 1 1/2 inch $ 15.57 2 inch $ 20.29 3 inch $ 33.20 4 inch $ 51.27 Tiers (in Gallons) 2 Rates prior to 8-1-2016 1 Rates effective 8-1-2016 1 Tier 1: < 20,001 $ 4.30 $ 4.36 Tier 2: 20,001 –30,000 $ 4.86 $ 4.36 Tier 3: 30,001 –40,000 $ 5.42 $ 4.36 Tier 4: 40,001 –50,000 $ 5.98 $ 4.36 Tier 5: > 50,000 $ 6.54 $ 4.36 Monthly Customer Charge Monthly Volumetric Rate Structure 1.Residential and Non-Residential customer charges and volumetric rates are identical.The City charges outside City residential customers a monthly rate of $17.55. 2.The Tier 1 volumetric rates do not apply to the first 1,500 gallons of water consumption. NEWGEN STRATEGIES AND SOLUTIONS, LLC Wastewater Rate Structure 11 Rate Component Residential Rate Non-Residential Rate Base Charge (Includes 1,500 gallons of billed use) $ 10.45 $ 13.45 Volumetric Rate: $ 3.14 (Based on Winter Average Use) $ 3.14 (Based on Actual Water Use) Cost of Service Findings NEWGEN STRATEGIES AND SOLUTIONS, LLC Water Background 13 •Adopted flat rate structure in July 2016 of $4.36 / 1,000 gallons •Approximately 75% of total water utility expenses are attributable to purchased water costs •Meter factor equivalencies are inconsistent with recommended practices NEWGEN STRATEGIES AND SOLUTIONS, LLC Volumetric Water Rate Structure 14 Tiers (in Gallons) 1 Rates prior to 8-1-2016 Rates effective 8-1-2016 Tier 1: < 20,001 $ 4.30 $ 4.36 Tier 2: 20,001 –30,000 $ 4.86 $ 4.36 Tier 3: 30,001 –40,000 $ 5.42 $ 4.36 Tier 4: 40,001 –50,000 $ 5.98 $ 4.36 Tier 5: > 50,000 $ 6.54 $ 4.36 1.The Tier 1 volumetric rates do not apply to the first 1,500 gallons of water consumption. NEWGEN STRATEGIES AND SOLUTIONS, LLC Water Meter Factors 15 AWWA Max Flow Rate (GPM) Equivalent Relative to 1” Current Meter Equivalencies Current Customer Charge Rates adhering to AWWA Equivalencies Meter Size 5/8 inch 20 1.00 1.00 $ 13.55 $ 13.55 3/4 inch 30 1.00 1.00 $ 13.55 $ 13.55 1 inch 50 1.00 1.00 $ 13.55 $ 13.55 1 1/2 inch 100 2.00 1.15 $ 15.57 $ 27.10 2 inch 160 3.20 1.50 $ 20.29 $ 43.36 3 inch 300 6.00 2.45 $ 33.20 $ 81.30 4 inch 500 10.00 3.78 $ 51.27 $ 135.50 -Meter Equivalent Factors based on AWWA Standards reflect the overall impact, and capital investment required, to serve larger meters NEWGEN STRATEGIES AND SOLUTIONS, LLC Water Customers by Meter Size 16 Residential 1 Non-Residential Government Total Meter Size 5/8 inch 1 78 0 79 3/4 inch 2,573 331 18 2,922 1 inch 6,296 263 19 6,578 1 1/2 inch 39 115 4 158 2 inch 25 85 35 145 3 inch 0 3 0 3 4 inch 0 12 3 15 Total 8,934 887 79 9,900 Consumption (in 1,000 gallons)1,868,849 284,129 43,374 2,196,352 1.Includes outside City customer meters.Please note there are nine (9)outside city customers with 3/4”meters and four (4)outside city customers with 1”meters.For these particular meter sizes,outside city customers are charged a monthly rate of $17.55. 2.The values in the table above reflect the forecasted amounts for FY 2017. NEWGEN STRATEGIES AND SOLUTIONS, LLC Government Meters Size and Department 17 3/4"1”1 1/2"2”4”Total Community Center 2 2 Justice Center (Police)2 2 Public Works 1 2 3 6 Fire Department 3 3 6 City Hall Complex 2 3 3 8 Parks & Leisure Services 17 12 1 22 3 55 Total 18 19 4 35 3 79 NEWGEN STRATEGIES AND SOLUTIONS, LLC Summary of Water Expenses 18 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Total Cost of Service*$ 12,207,177 $ 12,694,119 $ 13,189,351 $ 13,603,569 $ 13,935,714 Non-Rate Revenue**(155,356)(155,356)(155,356)(155,356)(155,356) Total Revenue Requirement $ 12,051,821 $ 12,538,763 $ 13,033,995 $ 13,448,213 $ 13,780,358 * Includes annual capital cash investments of $1,400,000 (FY 2017); $1,530,293 (FY 2018); $1,591,033 (FY 2019); $1,572,530 (FY 2020); $1,553,437 (FY 2021) **Includes revenues from earned interest, water installation, penalties, and other miscellaneous sources •Total Cost of Service (FY 2017) = $12,207,177 •The Revenue Requirement, which is the amount that should be generated from rate revenues (FY 2017) = $12,051,821 NEWGEN STRATEGIES AND SOLUTIONS, LLC Inflation & Growth Assumptions 19 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Inflation Factors General Inflation 0.0%2.0%2.0%2.0%2.0% Purchased Water 0.0%5.3%5.1%4.0%3.1% Wastewater Treatment 0.0%15.0%15.0%15.0%15.0% Growth Factors Residential Growth 0.5%0.5%0.5%0.5%0.5% Commercial Growth 0.0%0.0%0.0%0.0%0.0% 1. Inflation factors are consistent with the City’s forecasted budget. Growth assumptions are conservative and were confirmed by City staff. NEWGEN STRATEGIES AND SOLUTIONS, LLC Components of Water Utility Expenses 20 •There are two primary components of expenses for the water utility: –Distribution Cost of Service (FY 2017): $3,071,054 –Purchased Water Cost (FY 2017): $8,980,767 NEWGEN STRATEGIES AND SOLUTIONS, LLC Water Distribution Cost 21 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Distribution Revenue Requirement $3,071,054 $ 3,085,175 $ 3,099,884 $ 3,114,666 $ 3,129,522 Meter Count*9,821 9,867 9,914 9,961 10,009 Average Cost per Meter per Month $ 26.06 $ 26.06 $ 26.06 $ 26.06 $ 26.06 *Meter count excludes government meters as these are non-billed •The average distribution cost per meter is approximately $26.06 if 100% of distribution costs are recovered through the monthly minimum bill •The current average rate per meter per month is $13.55 as compared to an average cost of $26.06 per meter per month •Water sales (via the volumetric rate) are currently used to recover a portion of distribution costs, which are not fully recovered by the monthly minimum charge NEWGEN STRATEGIES AND SOLUTIONS, LLC Water Distribution Cost 22 •The City currently recovers approximately $1.6 million annually through the monthly minimum charge •Because the City currently includes 1,500 gallons of consumption in the monthly minimum charge, a portion of these revenues are for purchased water FY 2017 Total Revenue Generated from Monthly Base Rate $ 1,616,405 Total Revenue Required to Provide Distribution Costs 3,071,054 Additional Revenue Needed $ 1,454,649 Annual Volumes included in Minimum Bill (000’s gal)176,814 Current Volumetric Rate (TRA O&M/Debt)$4.17 Total Price of Water in Base Charges $ 737,314 NEWGEN STRATEGIES AND SOLUTIONS, LLC Purchased Water Expense 23 •The purchased water cost is a variable rate that is comprised of the following: –O&M: A volumetric charge for water that is based on projected usage –Debt: A fixed charge that is based on a volumetric rate and budgeted debt service •The City must purchase more water than it sells due to the following: –Water Loss: The percentage of water lost from the distribution system –Non-Revenue Water: (i.e. Government accounts are not currently billed for water usage) NEWGEN STRATEGIES AND SOLUTIONS, LLC Water Loss 24 •The statewide average for water loss in 2014 was 12.1% •The City of Colleyville has averaged 3.06% water loss over the last 4 years •Flushing is not included in the loss rate of 3.06% –Flushing operations are impacted by the fluctuations in water use which result in varying amounts of water flushed annually. For FY 2017, the City projects 750,000 gallons of flushed water. NEWGEN STRATEGIES AND SOLUTIONS, LLC Purchased Water Expense 25 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Purchased Water $ 8,980,767 $ 9,453,587 $ 9,934,111 $ 10,333,547 $ 10,650,836 Annual Consumption (1,000 gallons)2,152,978 2,163,140 2,173,354 2,183,618 2,193,934 Cost per 1,000 gallons $ 4.17 $ 4.37 $ 4.57 $ 4.73 $ 4.85 •The average volumetric cost (per 1,000 gallons) is approximately $4.17 for FY 2017 if 100% of purchased water expenses are recovered through the volumetric rate •The current volumetric rate is $4.36 per 1,000 gallons •Water sales (via the volumetric rate) are currently used to recover a portion of distribution costs, which are not fully recovered by the monthly minimum charge •Annual consumption excludes government volumes as these are non-billed, but includes volumes in minimum bill. –Government water consumption is projected to be approximately 43,374 (in 1,000 gallons) on annual basis. NEWGEN STRATEGIES AND SOLUTIONS, LLC Water Cost Analysis Findings 26 •The City is not recovering sufficient revenue in the monthly minimum charge to fund the utility’s distribution expense •The purchased water volumetric rates are currently adequate and providing support for the distribution service •Rate adjustments will be needed to ensure the balance between components as well as to account for future cost increases, particularly with purchased water NEWGEN STRATEGIES AND SOLUTIONS, LLC Wastewater Background 27 •City uses the winter months’ average of December – February for sewer calculations on residential customers –This is a commonly accepted practice within the utility industry –The average residential customer is billed for 8,500 gallons per month •Approximately 55% of total wastewater utility costs are attributable to purchased wastewater treatment –Purchased wastewater treatment is anticipated to increase to 69% of total wastewater utility costs over the next five years NEWGEN STRATEGIES AND SOLUTIONS, LLC Wastewater Customers & Consumption 28 Residential Non-Residential Government Total Number of Customers 8,603 447 79 9,129 Billed Volumes (in 1,000 gallons)926,741 115,543 43,374 1 1,085,658 Average Monthly Volumes (in 1,000 gallons)77,228 9,629 3,615 90,472 Residential Winter Average 8,500 1. Government flow is not billed. This value represents average government usage on an annual basis. 2. The table above includes the projected number of customers and billed volumes for FY 2017. NEWGEN STRATEGIES AND SOLUTIONS, LLC Summary of Wastewater Expenses 29 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Total Cost of Service*$ 4,500,243 $ 4,870,943 $ 5,295,476 $ 5,782,328 $ 6,340,840 Non-Rate Revenue**(128,356)(128,356)(128,356)(128,356)(128,356) Total Revenue Requirement $ 4,371,887 $ 4,742,587 $ 5,167,120 $ 5,653,972 $ 6,212,484 •Total Cost of Service (FY 2017) = $4,500,243 •The Revenue Requirement, which is the amount that should be generated from rate revenues (FY 2017) = $4,371,887 * Includes annual capital cash investments of $600,000 (FY 2017); $710,850 (FY 2018); $772,626 (FY 2019); $755,260 (FY 2020); $737,406 (FY 2021) **Includes revenues from earned interest, sewer installation revenues, penalties, and other miscellaneous sources NEWGEN STRATEGIES AND SOLUTIONS, LLC Components of Wastewater Utility Expenses 30 •There are two primary components of expenses for the wastewater utility: –Collection Cost of Service (FY 2017): $1,965,254 –Purchased Wastewater Treatment (FY 2017): $2,406,633 NEWGEN STRATEGIES AND SOLUTIONS, LLC Wastewater Collection Cost 31 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Collection Revenue Requirement $ 1,965,254 $ 1,974,959 $ 1,984,349 $ 1,993,785 $ 2,003,268 Customer Count 9,050 9,093 9,136 9,179 9,223 Average Cost per Customer per Month $ 18.10 $ 18.10 $ 18.10 $ 18.10 $ 18.10 *Customer count excludes the government customer class as it is non-billed •The average monthly cost per meter is approximately $18.10 if 100% of collection costs are recovered through the monthly minimum charge •The current average rate per customer per month is $10.45 for residential customers (and $13.45 for non-residential customers) as compared to an average cost of $18.10 per customer per month •Flow revenues (via the volumetric sewer rate) are currently used to recover a portion of collection costs, which are not fully recovered by the monthly minimum charge NEWGEN STRATEGIES AND SOLUTIONS, LLC Wastewater Collection Cost 32 Current Total Revenue Generated from Monthly Base Rate $ 1,150,937 Required Total Revenue Require to Provide Collection Costs 1,965,254 Additional Revenue Needed $ 814,317 Annual Volumes included in Minimum Bill (000’s gal)162,900 Current Volumetric Rate (TRA O&M/Debt)$2.31 Total Purchased Wastewater Treatment Cost Recovery $ 376,299 •The City currently recovers approximately $1.1 million annually through the monthly minimum charge •Because the City currently includes 1,500 gallons of billed flow in the monthly minimum charge, a portion of these revenues are for wastewater treatment NEWGEN STRATEGIES AND SOLUTIONS, LLC Purchased Wastewater Treatment 33 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Purchased Wastewater Treatment $ 2,406,633 $ 2,767,627 $ 3,182,772 $ 3,660,187 $ 4,209,215 Annual Billed Flow* (1,000 gallons)1,042,284 1,046,918 1,051,575 1,056,255 1,060,958 Cost per 1,000 gallons $ 2.31 $ 2.64 $3.03 $ 3.47 $ 3.97 •The average cost (per 1,000 gallons) is approximately $2.31 for FY 2017 •The current volumetric rate is $3.14 per 1,000 gallons •Flow revenues (via the volumetric sewer rate) are currently used to recover a portion of collection costs, which are not fully recovered by the monthly minimum charge •Annual billed flow excludes government volumes as these are non-billed, but includes volumes allotted in the minimum bill. –Government flow is projected to be approximately 43,374 (in 1,000 gallons) annually. NEWGEN STRATEGIES AND SOLUTIONS, LLC Wastewater Cost Analysis Findings 34 •The City is not recovering sufficient revenue in the monthly minimum charge to fund the utility’s collection expense •The wastewater treatment volumetric rates are currently adequate and providing support for the collection service •Rate adjustments will be needed to ensure the balance between components as well as to account for future cost increases, particularly with purchased wastewater treatment Cost Recovery Philosophy NEWGEN STRATEGIES AND SOLUTIONS, LLC Cost Recovery Policy Discussions 36 •Utility is a revenue-neutral entity –Revenues must match or equal expenditures •Like a business, cash-flow matters –Greater revenue in the summer, expenses year-round •Two -Part rate structure must be balanced NEWGEN STRATEGIES AND SOLUTIONS, LLC City’s Cost Structure 37 •Purchased water / wastewater treatment service consists of two parts –Debt Service (Fixed) –O&M Payment (Varies based on use) •Distribution / Collection cost primarily fixed –Only varying elements are electricity and chemicals NEWGEN STRATEGIES AND SOLUTIONS, LLC Two -Part Rate Structure 38 •What cost should be recovered in fixed charge? –Stable component of revenue stream –Not impacted by use / weather –Unavoidable cost for customer –Recommend the City recover Distribution / Collection cost in fixed charge •Other Recommendations –The City should continue its plan to remove all volumes from minimum bill –Consider implementation of AWWA meter equivalencies NEWGEN STRATEGIES AND SOLUTIONS, LLC Two -Part Rate Structure 39 •What cost should be recovered in the variable charge? –Impacted by weather / use –Element allowing a customer to control their bill –Recommend the City recover the purchased water / wastewater treatment service in variable charge •How should variable charge be structured? NEWGEN STRATEGIES AND SOLUTIONS, LLC Rate Stabilization Mechanism •Rate stabilization mechanisms can be used to mitigate unpredictable fluctuations in cost in order to stabilize rates and meet affordability goals •Designated reserve reported as a separate line-item on the Fund Financial Statements –Interest accrues to the benefit of the reserve –Important to designate and insulate reserve •Given the impact of the TRA true-up, we recommend the City consider adding a small incremental charge to the volumetric rate to build reserve 40 NEWGEN STRATEGIES AND SOLUTIONS, LLC Rate Stabilization Mechanism •Potential Principles: –An initial amount will be added to every 1,000 gallons sold to fund the reserve –Reserve will be funded up to a stated level (i.e., $500,000) –Once funded, all true-up payments will be made from the reserve –If credits from TRA are received, they will first be used to fund reserve back to target level. If remaining funds are available, they will be applied to City capital projects or returned to ratepayers at Council discretion –Charges will be evaluated annually to determine needed adjustments 41 NEWGEN STRATEGIES AND SOLUTIONS, LLC Next Steps . . . 42 Determine Cost of Service •What is our cost of doing business? Establish Cost Recovery Philosophy •How do we recover the cost from customers? Review Cost Recovery Options •What is the impact to customers of our chosen philosophy? Adopt Rates Questions / Discussion Economics | Strategy | Stakeholders | Sustainability www.newgenstrategies.net